Arbitration - Revision history

SuddenWhipVapor: improved wording

2026-05-15T19:28:17Z

improved wording

SuddenWhipVapor: Deduplicate arbitration snippet

2026-05-10T07:57:00Z

Deduplicate arbitration snippet

SuddenWhipVapor: /* Process */ as per dispute resolution article, remove reference to confiscation

2024-11-27T09:42:53Z

Process: as per dispute resolution article, remove reference to confiscation

Pazza: /* Process */

2024-08-25T16:03:32Z

Process

Pazza: /* Process */

2024-08-25T16:01:08Z

Process

Pazza at 16:00, 25 August 2024

2024-08-25T16:00:01Z

Pazza: /* FAQ */

2023-02-10T23:01:17Z

FAQ

Pazza: /* FAQ */

2023-02-10T23:00:37Z

FAQ

Pazza: /* Why We Cannot Merge These Roles */

2023-02-10T22:50:44Z

Why We Cannot Merge These Roles

Pazza: /* Avoiding Fraud */

2023-02-10T22:48:56Z

Avoiding Fraud

@@ Line 24: / Line 24: @@
 '''In plain language, here's how the process works for traders:'''
-# If you’re dissatisfied with the mediator’s suggestion and think you are entitled to a better outcome, request arbitration when it's available (doing so publishes the time-locked transaction and sends funds to the donation addresses owned by the Burning Men).
+# If you’re dissatisfied with the mediator’s suggestion and think you are entitled to a better outcome, request arbitration when it's available (doing so publishes the time-locked transaction and sends funds to the donation addresses owned by the BurningMen).
 # Collaborate with an arbitrator to clarify the details of your case.
 # If the arbitrator agrees you are owed BTC, they will pay it to you.
@@ Line 61: / Line 61: @@
 === Time-Locked Delayed Payout Payout Transaction ===
 Since [https://github.com/bisq-network/bisq/releases/tag/v1.9.8 v1.9.8], traders create a time-locked delayed payout payout tx where all the locked up funds (trade amount + both [[security deposit|security deposits]]) are sent to Bisq donation address owners, also known as burningmen. These addresses are defined in the DAO. The burningmen are Bisq contributors who burn their BSQ in order to get a portion of time-locked delayed payouts and trading fees paid in BTC.
-From v1.2 to v1.9.8, this address was controlled by a single burning man who exchanged BTC for BSQ to burn them afterwards. That supposed a risk for the DAO as, although the burningman had to place a BSQ bond, the amount of the bond was lower than the amount of expected BTC to collect. Distributing the role into multiple burningman and requiring them to burn BSQ in advance, this risk has significantly decreased.
+From v1.2 to v1.9.8, this address was controlled by a single burningman who exchanged BTC for BSQ to burn them afterwards. That supposed a risk for the DAO as, although the burningman had to place a BSQ bond, the amount of the bond was lower than the amount of expected BTC to collect. Distributing the role into multiple burningman and requiring them to burn BSQ in advance, this risk has significantly decreased.
 If a trade is not completed in 10 days (for altcoins) or 20 days (for fiat), either of the 2 traders have a chance (after mediation) to publish the time-locked payout tx where all deposit funds are sent to the donation address, requiring the aggrieved trader to request arbitration so they can receive a payout. With the preliminary solution we use now, the trader gets a payout from an arbitrator directly, '''but the eventual goal is that the arbitrator makes a suggestion which the DAO uses as a basis for voting on the reimbursement request made by the trader(s)'''.
@@ Line 78: / Line 78: @@
 DAO contributors have another way to turn BSQ into BTC while contributing to remove the legacy burningman, which was a central point of failure for the Bisq DAO and created distorsion as a big BSQ buyer. Some burningmen will require to buy BSQ to be burned eventually. The impact for the market will be reduced as there will be multiple interested parties.
-Let’s make a simple example to clarify:
+* Two traders enter into a 1 BTC trade.
-* Two traders are engaged in a 1 BTC trade, with 0.15 BTC each locked in a security deposit
+After the required time passes and mediation is unsuccessful, one trader opens an arbitration case. At that point, the pre-signed and time-locked delayed payout transaction becomes valid and broadcasts the full 1.3 BTC to donation addresses controlled by the burningmen.
-After the required time passes, and the mediation process is closed, one of the traders opens an arbitration case. By doing so, the 1.3 BTC is sent to donation addresses (controlled by the burning men). This transaction was signed by both traders at the time the offer was taken, but was time-locked so it was invalid until the required time had passed. The arbitrator investigates the case and makes a 1.15 BTC payout to the winning trader. He pays this sum from his personal wallet (pre-financing).
+The arbitrator investigates the dispute and determines that one trader should receive a payout of 1.15 BTC. Since the locked funds have already been redirected to the burningmen, the arbitrator pre-finances the reimbursement from their own wallet and sends 1.15 BTC directly to the winning trader.
-We assume that burningmen know there will be only one delayed payout during a cycle: burningmen burned 12,000 BSQ and received the 1.3 BTC into different addresses (which generates a 0.1 BTC profit), each one receiving a % based on the amount they've burned.
+Now assume there is only this single delayed payout event during the DAO cycle:
-=== Why We Cannot Merge the Arbitrator and Burning Man Roles ===
+* Burningmen collectively burned 12,000 BSQ.
 The separation of these roles is essential to keep the system flexible, censorship-resistant, and scalable.
@@ Line 97: / Line 111: @@
 '''Keep in mind that the current dual role of arbitrators (i.e., supreme mediator and refund agent) is not the ultimate goal'''. The refund agent part of the role should be delegated to traders once the trade process is improved to a level where such cases rarely happen. How to keep the burden for traders low, and how to compensate them for this extra work—these items are still up for discussion (e.g. the trader could get a slight bonus if he does the reimbursement himself). A preferred option is to keep trader-submitted reimbursement requests optional and still offer arbitrator-funded reimbursements for a fee. The role could even be split, such that a market of refund agents develops where each agent offers their pre-financing services at different prices. But before getting into any of these discussions, we need to reduce bugs and improve UX.
-The role of the burning man has been distributed between different contributors and  a part of their earnings come directly as BTC, but it could also disappear when we have very few dispute cases, and once trade fees in BTC do not add up to a large amount. We could use the donation address to support critical infrastructure we use like Tor. Or we could use it to fund Bisq projects like the mobile wallet.  There are many possibilities for how we could use these funds—but if we merged the burning man role with the arbitrator role, we would lose this flexibility.
+The role of the burningman has been distributed between different contributors and  a part of their earnings come directly as BTC, but it could also disappear when we have very few dispute cases, and once trade fees in BTC do not add up to a large amount. We could use the donation address to support critical infrastructure we use like Tor. Or we could use it to fund Bisq projects like the mobile wallet.  There are many possibilities for how we could use these funds—but if we merged the burningman role with the arbitrator role, we would lose this flexibility.
-The risks of the 2 roles are very different. An arbitrator does not present any severe risk to the DAO, actually, he ''takes on'' a lot of risk. A single burning man, on the other hand, is a trusted role and there is an open problem that a malicious burning man could make many trades, go to the arbitrator, get payouts, and then run away with the funds he received from the donation address. The high bond is a partial protection, but ultimately, this is a trusted role and only highly trusted Bisq contributors can take it on. This problem has been mitigated by distributing the role between different contributors with a cap on how much BTC they can get. So scalability is a small issue with the distributed burningmen, but we cannot say the same about the arbitrator. With more traders, there will be more cases, and we might need more arbitrators. Furthermore, with more regional expansion, we will need arbitrators with particular language skills. When arbitrators and burningmen are not combined into one role, we can add arbitrators to support this growth without posing high risk to the Bisq network. If we merged both roles, we would not be able to do this. There is a risk arbitrators expose to the DAO: they could fake their reporting, but this is likely solvable (traders can provide evidence).
+The risks of the 2 roles are very different. An arbitrator does not present any severe risk to the DAO, actually, he ''takes on'' a lot of risk. A single burningman, on the other hand, is a trusted role and there is an open problem that a malicious burningman could make many trades, go to the arbitrator, get payouts, and then run away with the funds he received from the donation address. The high bond is a partial protection, but ultimately, this is a trusted role and only highly trusted Bisq contributors can take it on. This problem has been mitigated by distributing the role between different contributors with a cap on how much BTC they can get. So scalability is a small issue with the distributed burningmen, but we cannot say the same about the arbitrator. With more traders, there will be more cases, and we might need more arbitrators. Furthermore, with more regional expansion, we will need arbitrators with particular language skills. When arbitrators and burningmen are not combined into one role, we can add arbitrators to support this growth without posing high risk to the Bisq network. If we merged both roles, we would not be able to do this. There is a risk arbitrators expose to the DAO: they could fake their reporting, but this is likely solvable (traders can provide evidence).
 Another important aspect is that arbitrator reimbursement is not automated. DAO stakeholders have ultimate power. Sure, they would probably lose an arbitrator if they don’t reimburse him fairly, and it might be hard to find new arbitrators after unfair behaviour from DAO stakeholders. But it is highly important that stakeholders be able to exercise absolute power.
@@ Line 148: / Line 162: @@
 Burning is done inside the Bisq software on <code>DAO / Burning / Burningmen</code>.
-'''Why not simply combine the burning man and arbitrator roles?'''
+'''Why not simply combine the burningman and arbitrator roles?'''
-[[#Why_We_Cannot_Merge_These_Roles|See longer explanation above]]. In short: to stay flexible, to be able to implement the target vision (reimbursement done by traders themselves), to avoid legal risks, to keep the arbitrator role scalable, and to address the trust/security issue with the current burning man model.
+[[#Why_We_Cannot_Merge_These_Roles|See longer explanation above]]. In short: to stay flexible, to be able to implement the target vision (reimbursement done by traders themselves), to avoid legal risks, to keep the arbitrator role scalable, and to address the trust/security issue with the current burningman model.
 [[Category:Processes]]

@@ Line 3: / Line 3: @@
 This page first covers the arbitration process itself, in a practical sense, so that users can be made aware of what to expect when trading. Then it covers the process in more detail, including its motivations, how all the components work together, and how the process is expected to develop in the future.
-{{Admonition_Warn|All trades placed from 1st January 2023 will use a new trade protocol ([[Burning Men|Burning Men Protocol]]) that is designed to further improve the decentralization of Bisq. The new protocol is a result of the proposal [https://github.com/bisq-network/proposals/issues/390 Distribute Burningman role to contributors who burned BSQ] which was vote on in Bisq DAO cycle 41 with 100% approval.
+{{ArbitrationCompensationTable}}
 == Process ==

@@ Line 32: / Line 32: @@
 [[Burning Men]] burn BSQ after estimating how many BTC from trading fees and delayed payouts will be during a cycle, and a filter controlled by the DAO distributes the BTC in proportion to how many BSQ have been burned. This keeps BSQ supply balanced, allowing for a corresponding amount of new BSQ to be issued to account for the BTC payouts made to traders as part of arbitration. As a result, BSQ supply is largely unaffected.
-This dynamic essentially makes bitcoin deposits confiscatable, enabling a sort of mutually assured destruction to drive dispute resolution on Bisq without trusted third parties.
+This dynamic essentially enables a sort of mutually assured destruction to drive dispute resolution on Bisq without trusted third parties.
 '''In plain language, here's how the process works for traders:'''

@@ Line 30: / Line 30: @@
 Requesting arbitration publishes this time-locked transaction, sending all funds in the multisig escrow (i.e., those of both trading peers) to the Bisq "donation addresses" (which are owned by the [[Burning Men]], Bisq contributors who burn BSQ in advance). This transaction can only be published 10 days after the deposit transaction is confirmed (for altcoin trades) and 20 days after the deposit transaction is confirmed (for fiat trades), which means arbitration is only available after this time has passed.
-Bisq contributors burn BSQ after estimating how many BTC from trading fees and delayed payouts will be during a cycle, and a filter controlled by the DAO distributes the BTC in proportion to how many BSQ have been burned. This keeps BSQ supply balanced, allowing for a corresponding amount of new BSQ to be issued to account for the BTC payouts made to traders as part of arbitration. As a result, BSQ supply is largely unaffected.
+[[Burning Men]] burn BSQ after estimating how many BTC from trading fees and delayed payouts will be during a cycle, and a filter controlled by the DAO distributes the BTC in proportion to how many BSQ have been burned. This keeps BSQ supply balanced, allowing for a corresponding amount of new BSQ to be issued to account for the BTC payouts made to traders as part of arbitration. As a result, BSQ supply is largely unaffected.
 This dynamic essentially makes bitcoin deposits confiscatable, enabling a sort of mutually assured destruction to drive dispute resolution on Bisq without trusted third parties.
@@ Line 36: / Line 36: @@
 '''In plain language, here's how the process works for traders:'''
-# If you’re dissatisfied with the mediator’s suggestion and think you are entitled to a better outcome, request arbitration when it's available (doing so publishes the time-locked transaction and sends funds to the donation address).
+# If you’re dissatisfied with the mediator’s suggestion and think you are entitled to a better outcome, request arbitration when it's available (doing so publishes the time-locked transaction and sends funds to the donation addresses owned by the Burning Men).
 # Collaborate with an arbitrator to clarify the details of your case.
 # If the arbitrator agrees you are owed BTC, they will pay it to you.
 Takeaway: if you are owed BTC after a dispute, you'll get it from an arbitrator who will refund you with their own funds. The arbitrator then requests reimbursement from the Bisq DAO usually once per DAO cycle and asks for the BSQ amount as a reimbursement for the BTC they have refunded Bisq traders. .

@@ Line 28: / Line 28: @@
 A ''time-locked delayed payout transaction'' is signed (but not published) at the beginning of the trade process. Its purpose is to allow time for traders and mediators to work out a payout using the funds in the 2-of-2 multisig escrow, and to eliminate the [[#Avoiding_Fraud|possibility of fraud]] in case they can't.
-Requesting arbitration publishes this time-locked transaction, sending all funds in the multisig escrow (i.e., those of both trading peers) to the Bisq "donation addresses" (which are owned by Bisq contributors who burn BSQ in advance). This transaction can only be published 10 days after the deposit transaction is confirmed (for altcoin trades) and 20 days after the deposit transaction is confirmed (for fiat trades), which means arbitration is only available after this time has passed.
+Requesting arbitration publishes this time-locked transaction, sending all funds in the multisig escrow (i.e., those of both trading peers) to the Bisq "donation addresses" (which are owned by the [[Burning Men]], Bisq contributors who burn BSQ in advance). This transaction can only be published 10 days after the deposit transaction is confirmed (for altcoin trades) and 20 days after the deposit transaction is confirmed (for fiat trades), which means arbitration is only available after this time has passed.
 Bisq contributors burn BSQ after estimating how many BTC from trading fees and delayed payouts will be during a cycle, and a filter controlled by the DAO distributes the BTC in proportion to how many BSQ have been burned. This keeps BSQ supply balanced, allowing for a corresponding amount of new BSQ to be issued to account for the BTC payouts made to traders as part of arbitration. As a result, BSQ supply is largely unaffected.

@@ Line 136: / Line 136: @@
 '''Are there any trades the arbitrator will not pay out? '''
-Arbitrators will only reimburse trades in which the multisig deposit has been sent to the Bisq donation addresses. For trades requiring large reimbursements (aboe 0.5 BTC) they should be aware the arbitrators will only [https://github.com/bisq-network/proposals/issues/296 partially reimburse traders up to 0.5 BTC]. Should a trader require a reimbursement over 0.5 BTC they can make a reimbursement request directly to the DAO on the [https://github.com/bisq-network/support support repository].
+Arbitrators will only reimburse trades in which the multisig deposit has been sent to the Bisq donation addresses. For trades requiring large reimbursements (above 0.5 BTC) they should be aware the arbitrators will only [https://github.com/bisq-network/proposals/issues/296 partially reimburse traders up to 0.5 BTC]. Should a trader require a reimbursement over 0.5 BTC they can make a reimbursement request directly to the DAO on the [https://github.com/bisq-network/support support repository].
 '''How does the arbitrator issue a reimbursement request for an amount of BSQ equivalent to the amount of BTC paid out-of-pocket to settle disputes?'''

@@ Line 132: / Line 132: @@
 '''How, upon deciding a payout, does an arbitrator pay the BTC to Bob and Alice?'''
-Arbitrators need to have enough BTC to cover potential payouts—it's a requirement for anyone seeking to hold the role. An arbitration case can only be closed once an arbitrator makes a payout. Then, at the end of the DAO cycle, they'll get reimbursed with BSQ (which they can then sell for BTC).
+Arbitrators need to have enough BTC to cover potential payouts (up to 0.5 BTC per trade) — it's a requirement for anyone seeking to hold the role. An arbitration case can only be closed once an arbitrator makes a payout. Then, at the end of the DAO cycle, they'll get reimbursed with BSQ (which they can then sell for BTC).
 '''How does the arbitrator issue a reimbursement request for an amount of BSQ equivalent to the amount of BTC paid out-of-pocket to settle disputes?'''

@@ Line 102: / Line 102: @@
 Arbitrator will have to burn or sell the BSQ the reimbursed BSQ to get BTC for new payments and reduce volatility risk, which is taking a high risk as they pre-finance the reimbursement. Bisq tries to make arbitration rare as reimbursing traders has a big cost.
-=== Why We Cannot Merge These Roles ===
+=== Why We Cannot Merge the Arbitrator and Burning Man Roles ===
-The separation of those roles is essential to keep the system flexible, censorship-resistant, and scalable.
+The separation of these roles is essential to keep the system flexible, censorship-resistant, and scalable.
 '''Keep in mind that the current dual role of arbitrators (i.e., supreme mediator and refund agent) is not the ultimate goal'''. The refund agent part of the role should be delegated to traders once the trade process is improved to a level where such cases rarely happen. How to keep the burden for traders low, and how to compensate them for this extra work—these items are still up for discussion (e.g. the trader could get a slight bonus if he does the reimbursement himself). A preferred option is to keep trader-submitted reimbursement requests optional and still offer arbitrator-funded reimbursements for a fee. The role could even be split, such that a market of refund agents develops where each agent offers their pre-financing services at different prices. But before getting into any of these discussions, we need to reduce bugs and improve UX.
@@ Line 114: / Line 114: @@
 Another important aspect is that arbitrator reimbursement is not automated. DAO stakeholders have ultimate power. Sure, they would probably lose an arbitrator if they don’t reimburse him fairly, and it might be hard to find new arbitrators after unfair behaviour from DAO stakeholders. But it is highly important that stakeholders be able to exercise absolute power.
 Another consideration: if the process to reimburse arbitrators were automated, the result would probably involve legal risks that we want to avoid. The role would then adopt elements of a custodial function, and that would likely trigger regulatory issues.
 === FAQ ===

@@ Line 80: / Line 80: @@
 The time-locked delayed payout payout tx is essential to avoid fraud. A trader could make a self-trade and then claim that his “peer” has not paid. Without the time-locked payout tx, he could go through the dispute process, make a reimbursement request, and receive BSQ for the equivalent “lost” funds in BTC. After that he could make the payout to himself from the trade, since he controls both “traders”—thereby scamming the DAO with the trade amount.
-To avoid this scheme, we require that locked up funds in the 2-of-2 multisig deposit tx are spent before opening an arbitration ticket. The funds are sent to the donation addresses so that fraud scheme is not possible anymore.
+To avoid this fraud, we require that locked up funds in the 2-of-2 multisig deposit tx are spent before opening an arbitration ticket. Thus it is not possible for a trader to defraud the DAO in the way described above.
 === Donation Address Owners (burningmen) ===